It gives me great pleasure to see you steering the work of this important sessional committee of the TDB on LDCs. As you know, the evolution of the LDCs Group and the institutional trajectory of UNCTAD have been closely intertwined since the early 1970s when the General Assembly decided to create the category so as to better address the problems of the poorest countries in the world. Currently, the central focus of the work of UNCTAD with regard to the least developed countries is on how best to contribute to the substantive and technical implementation of the Brussels Programme of Action for these countries for the decade 2001-2010. This issue will be given special consideration, particularly in the context of mainstreaming work on LDCs in the preparatory process for UNCTAD XI and during the Conference itself, which will take place in Brazil next year. One of the challenging aspects of our preparation for UNCTAD XI is the increasing prominence of the complex relationship between global processes and national development strategies and the question of how trade could contribute to the global goal of poverty reduction with a view to poverty elimination. These are among the central issues that UNCTAD will be addressing in the run-up to the Conference, with an increasing emphasis on understanding the interplay between trade, investment, finance and technology and related issues.

The reduction of extreme poverty by half by the target year of 2015 has recently become a core objective of the development discourse. The Millennium Declaration of the United Nations and the Programme of Action for Least Developed Countries as well as other major conferences and summits of the United Nations stress the pressing need for attaining this objective. No one underestimates the difficulties facing developing countries in their attempt to reach this global goal of poverty reduction as a substantial proportion of their population is living in extreme poverty. The situation of LDCs is even more alarming, as the absolute majority of their population lives on a dollar a day or less and most LDCs are off the agreed target of the Millennium Development goals. To meet the MDGs calls, therefore, for concerted efforts by the LDCs themselves and their development partners.

The frequency of civil strifes and conflicts in LDCs is a matter of increasing concern. From Liberia to Sierra Leone and the Great Lakes region, these developments are having devastating consequences on the social fabric of the countries affected. It is important for us to also look into these predicaments from a multi-dimensional perspective particularly because of interactions between conflicts and the phenomenon of failed states in many LDCs.

One of the central challenges of the current development problematique is how to create the conditions for a long-term growth and development for the poorest countries of the world. This, in turn, raises questions as to the right strategies and policy mix required to attain these development objectives. It is in this context that trade is assuming increasing importance, although whether or not trade serves as an engine for growth depends strongly on the types of goods in which countries specialize and the types of structural impediments they face.

An increase of poverty in the LDCs is typically associated with a confluence of factors such as: low or erratic rates of growth, declining or volatile revenues from exports, declining capacities to import, very low rate of domestic savings, unpredictable or insufficient external resource flows and unsustainable levels of external indebtedness. The combination of these factors determines the poverty trap in which the least developed countries are caught. In order for the world´s least developed countries to reverse the current trends in poverty and to make progress towards the objective of poverty reduction, it is essential that this poverty trap be broken. Trade is an important means to that end, and preferential market access initiatives are steps in the right direction. This is why UNCTAD has been paying increasing attention to this issue and to identifying ways and means of enhancing the developmental impact of preferential market access initiatives in favor of LDCs. LDCs should be assisted to seize the benefits of their continuous efforts to promote openness, including of their participation in multilateral trade negotiations, so as to effectively make liberalization not an end in itself but rather a means to attain the objectives of development.

As regards the positive effects that market access preferences may have, two recent and relatively successful cases within the LDCs´ group are Lesotho and Madagascar, which benefited from the African Growth and Opportunity Act (AGOA) of the United States of America. These examples illustrate that market access preferences do have the potential to promote trade, trigger investment responses and generate employment, which in turn contribute to poverty reduction efforts. I am particularly pleased to note that the Minister of Trade and Industry of Lesotho will address these issues, drawing from his country experiences. Also, Mr. William Cline, a senior fellow at the Institute of International Economics and the Center for Global Development in Washington, will share with us his extensive academic and professional expertise on issues related to trade and poverty and on how recent preferential market access initiatives can contribute to the global goal of poverty reduction in poor countries. I welcome both panelists and thank them for accepting our invitation to facilitate the deliberations of the Board.

Mr. Chairman, Distinguished Delegates,

In considering the positive developments that I have just highlighted, we should take into account the following important considerations which stem from the work carried out thus far by UNCTAD. Firstly, market access preferences have not automatically resulted in raising incomes and falling poverty rates in the majority of preference-receiving countries. Secondly, even where market access preferences have had positive effects, it is not clear whether the positive effects are sustainable when market access preferences are being eroded or when they are being withdrawn. This is because of the very fact that foreign firms that have established production bases in LDCs in order to make use of market access preferences granted to them might dismantle their production bases should these market access preferences be eroded or abandoned. Finally, in order to make trade work for poverty reduction, it is important to make market access preferences work for trade. To this end, it is equally important that the provision of market access preferences is translated into a real improvement in market entry. Our research and analytical work on this issue indicates that although the LDCs have enjoyed market access preferences, many of them have not been able to effectively utilize them due to a host of internal and external factors. In this context, it is critical that market access preferences - which create export opportunities - be addressed in tandem with factors that seriously hinder the development of productive capacities in LDCs. At present, an increase in export levels and a more effective utilization of market access preferences are impeded by weak supply capacities in these countries and by the economic policies of their development partners, especially their trade and agricultural policies.

While market access preferences have helped to reduce or even eliminate many tariff barriers to trade, they have not yet done away with many non-tariff barriers to trade, including for example stringent sanitary and phytosanitary standards and complex rules of origin. Moreover, some subsidies of developed countries can inhibit the ability of least developed countries to access the markets of their development partners. This occurs when the subsidies of the industrial countries are granted to sectors in which the least developed countries have a comparative advantage. Such subsidies granted to producers and exporters in industrial countries can have particularly negative effects on the production and exports of least developed countries as the agricultural goods and low-tech manufactures concerned continue to constitute the backbone of the LDC economies. The recent example of cotton provides a good illustration of this phenomenon.

UNCTAD will continue to pay increasing attention to the complex interplay between trade and poverty. This is the theme of the forthcoming Least Developed Countries Report 2004. We intend to contribute to assisting LDCs in their efforts to make trade work for development and poverty reduction. This is perhaps one of the most daunting challenges of present times. It requires bold experimentation, which goes beyond addressing trade negotiations and the enhancement of supply capacities in isolation or in a sequential manner. What is needed now is to deal in earnest, and simultaneously, with the interactions between these two areas. While we negotiate new rules or grant preferential treatment to the weaker developing countries, let us make concomitant determined efforts to strengthen supply capabilities in them. This approach is a perfect illustration of policy coherence. The challenge is to complement better market access with access to financial resources and technology, and to enable the LDCs to make use of the policy space they need to upgrade production and to compete in world markets. We need practical ideas on how to improve the utilization of preferences and encourage donors to retain preferences on a sustainable basis.

Let me conclude my statement, Mr. Chairman, by saying a few words about landlocked developing countries and about small island developing states, with which UNCTAD has been closely associated, contributing to collective efforts to address their respective geographical handicaps. In August of this year UNCTAD, in close collaboration with the Office of the High Representative for the LDCs in New York and with the support of regional commissions, has provided technical and substantive support to the first Ministerial Conference on Landlocked Developing Countries and their transit neighbors, which took place in Almaty, Kazakhstan. The outcome of the Conference and the commitments made on that occasion, when fully implemented, will certainly contribute to national and global efforts to overcome the impediments of geography by improving the transit transport systems with the view to enhancing competitiveness and accelerating economic development. UNCTAD will spare no effort in assisting these countries in their attempts to effectively integrate into the global economy. With regard to small island developing countries (SIDS), and in collaboration with other agencies, we will continue to provide technical and substantive support to these States on issues of direct relevance to their developmental objectives. This includes analysis of their vulnerability to and impact of natural disasters, providing trade related technical assistance as well as support measures needed to cope with these challenges. We are also currently engaged in supporting and actively participating in the preparatory process for the UN Conference on Small Island Developing States, due to take place in Mauritius in September 2004.

Let me take this opportunity to reiterate our full commitment to continue to assist these three categories of countries in their search for a better life for their people.